Posts Tagged ‘plans’

When I, or other consultants, talk about situations faced by business owners, I’m sure people think, “Yeah, how would he know?”

Or they see it as a self-serving pitch. “He has a solution, now he’s inventing a problem to fit it”.

So it’s always great to see an actual business owner talk about their experiences with a problem I’ve identified. It’s even better when they have a well-established reputation – like Jason Fried of 37signals.

Adaptive Strategy is an alternative developed by The Boston Consulting Group (BCG)1. Here’s how I think it applies to owner managed businesses.

Adaptive strategy is built on the 3 R’s required in a changing environment2.

1. Responsiveness (or agility). Means a company can respond quickly to changes in the market and begin to act while plans are still being finalized; is flexible in process and structure; and can deal with short cycle times. This should be an advantage for small to mid-size owner managed businesses which, by nature, can react to change more quickly than corporations.

2. Resilience (or robustness). Is a characteristic of owner managed companies which have strong balance sheets and good cash flow. They also must be good at thinking through all of the alternatives, having contingency plans and hedging bets. This gives them the ability to withstand any surprises.

3. Readiness (or anticipation). Is a result of how well a company stays in touch with its market – the quantity and quality of information it obtains from customers, suppliers and other industry players. This can’t be left to front line people. The owners and managers must get out there – they are the ones who use the information to think through different scenarios and improve forecasts.

An adaptive approach is applied using a 4 step closed loop process.

An adaptive strategy is a dynamic approach in which better-fitting strategies continuously evolve in response to change. It is applied via a 4 step process.

Step 1 – Variation (or innovation). A company continually looks to vary the status quo by targeted innovation; natural or proactive modification of internal practices; responding to signals from the economy, customers, competitors; and by leveraging the innovative capabilities of external resources e.g. suppliers.

Step 2 – Selection. The most promising variations/innovations are selected by e.g. pilot projects, limited and full-scale tests conducted directly in the marketplace.

Step 3 – Amplification (or scaling up). Those which show the greatest potential are quickly scaled up. They become a permanent part of the company’s routines and offerings by e.g. allocating resources to them.

Step 4 – Modulation. Modulation is simply fine tuning the application of the first 3 steps in response to what is happening in the marketplace and the company’s goals.

You may feel that you’ve seen each of the steps before. But BCG argues that the way in which they’re combined and applied is what makes adaptive strategy unlike classical strategy in a number of respects.

Practically, the most important difference is that the adaptive approach largely removes the distinction between planning and implementation, since successful strategies emerge from practice rather than from analysis and design.

It’s almost an extreme form of strategy by evolution.

Last words.

Can adaptive strategy be applied in owner managed businesses?

BCG has identified 4 situations in which adaptive strategy can be applied and well-known corporations which fit those situations. I’m not sure if the corporations pro-actively employed adaptive advantage or if BCG is fitting their actions to the model.

I’m waiting for more evidence.

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1 Kilian Berz, Managing Director of The Boston Consulting Group (BCG) Canada – presentation to the Canadian Association of Management Consultants (CAMC) and Cost and Management Accountants (CMA) in Toronto on 16 Feb 11.

In a recent blog posting I wrote that business planning has started/is starting/should have started for 2011. Then the other day I came across these 6 tips which I pulled together at the end of 2008.

At that time, you may remember, there was a deluge of bad news pouring from the newspapers, Internet and TV all day, every day. Some forecasters were saying the economy would rally in late 2009, others were saying it would take years before we saw an improvement.

I made the point then that, when so much of what is going on around you seems out of control, it’s easy to stop focussing on the things that are under your control. So, since uncertainty is still with us, I thought it was worth freshening up the Tips.

Tip #1 – Remember that we have always had to deal with uncertainty when developing plans and strategies. It may be true that there is more uncertainty now than in the past. However, don’t forget that no one has ever been able to accurately predict the future with any degree of consistency.

Three ways to deal with uncertainty are – keep digging until you find the best information available before firming up assumptions; put flexibility into plans and strategies; and think through contingency plans (e.g. plan for the best, worst, and most likely outcomes and be ready to deal with all of them). A fourth technique is to review, and adjust, goals more frequently.

Tip #2 – Make sure that you actually implement your plans and strategies. According to an Ernst & Young survey, 66% of corporate strategy is never executed.

In our experience implementation is handled just as poorly in owner managed companies – which generally have fewer employees (who are often located in the same premises) and which have fewer departments and layers. All of which should make communication and coordination easier.

There are a number of reasons why strategy implementation fails and the remaining tips will help you avoid them.

Tip #3 – Develop detailed Action Plans for execution. Involve key people when figuring out your goals for 2011 – and they’ll buy into what has to be done.

Compare the goals with the current situation and gaps will appear. Then ask them what – specifically – has to be done to close the gaps, by whom and by when. The answers to those questions will form the basis of your Action Plans for 2011.

Tip #4 – Avoid attempting too much, for 2 reasons. Firstly, there may be a long list of things to be done to close the gaps and no company has the resources to attack them all. So, prioritize the things which have the most impact on your goals and focus on them. You can go back and tackle the others later.

Secondly, you want to stay flexible enough to respond to whatever happens.

Tip #5 – Commit enough resources to completing the priorities. Business owners are inclined to tackle too much at once. They also try to do everything in the minimum amount of time – while spending as little money as possible.

Think about the priorities this way. You’ve invested time identifying reasonable goals and figuring out what has to be done to reach them. That effort will be wasted unless you commit the resources required to complete those action plans.

Even if you are allocating too many resources, you’ll complete the job ahead of schedule. Who doesn’t feel good when that happens?

Tip #6 – Follow up regularly and in a structured way. There are also 2 reasons for doing this. First, because no one can accurately predict the future you have to make time to compare what you thought would happen with what has happened and adjust for reality.

Second, what could be more important than making sure you complete the action plans that will lead to achieving your goals? Not dealing with the day-to-day problems, which always seem to be “urgent”. Prevent them getting in the way of the “important” priorities by making time to review progress toward your goals once a quarter.

The odds are that you’ve heard each one of these tips before. But the reality is that a gap exists between hearing – even knowing – the right thing to do and actually doing it. That’s why 66% of the companies surveyed wasted their time.